Delays push IRS to punish contractor

The Internal Revenue Service on Wednesday told its technology modernization contractor that continued delays and budget problems have forced the agency to open future projects to competition.

Specifically, the IRS was upset with extensive delays and overspending during development of the Customer Account Data Engine system and the Integrated Financial System, according to IRS Commissioner Mark Everson, who sent a Feb. 11, 2004, letter to California-based Computer Sciences Corporation. CSC is the prime contractor for both systems and the projects are designed to store taxpayer information and improve IRS efficiency.

The CADE system is set to be delivered in 2005, about 30 months overdue and almost $37 million over budget, according to a General Accounting Office report (GAO-04-438T). The IRS reported that the IFS system is on track to be delivered in October, about one year late. That system is currently anticipated to be more than $53 million over budget.

During a Thursday hearing of the House Ways and Means Subcommittee on Oversight, Everson said that the slippages on the programs reflect an "unsettling development" with the contractor.

CSC officials, however, have "indicated their willingness to bear the financial burden for this further delay," according to Everson's prepared testimony. He also praised the contactor's efforts to rectify the technical problems.

Even so, Everson said that the "IRS needs to take some stronger steps." Competitions for the next phase of IFT development will be open to competition, as will the contracts for upcoming IRS technology enforcement initiatives.

The White House fiscal 2005 budget proposal puts forward a 10 percent boost in enforcement funding, Everson said.

To remedy the ongoing problems, the IRS intends to assign planning to business experts. The agency's reliance on people with technical expertise for planning had derailed the program, Everson said.

Everson also said that the budget overruns and missed deadlines were a "joint failure" of CSC and the IRS. "It did get away from us," he admitted.

House lawmakers and experts were less charitable to CSC's efforts during the hearing.

"Unfortunately, this is not the first time the modernization program has fallen into a ditch," said Larry Levitan, a member of the IRS Oversight Board. The board, he said, has "lost confidence" in CSC.

"I'm stunned by what I'm seeing here, and I'm deeply alarmed about it," said Rep. Earl Pomeroy, D-N.D.

Paul Cofoni, the president of CSC's federal sector, said that the company accepts responsibility for the programs' shortfalls. Immediately after accepting blame, however, he said that many of the problems were caused by repeated change orders from the IRS. When the project began CSC should have "demanded that we had a detailed set of requirements," he said.

Cofoni also blamed the age of the system that the company is attempting to modernize.

Committee members, however, were not completely satisfied with the explanations.

"The bottom line is, we haven't met the mark," said Subcommittee Chairman Rep. Amo Houghton, R-N.Y.